The days when a c-store’s chilled range consisted of only bacon and milk are over as premium ready meals and food to go muscle in
Accounting for almost 18% of the average convenience store’s sales (but hitting new heights of more than 40% for some), the growing chilled foods category is certainly not one to be left out in the cold.
In fact, refrigeration is currently the top area of investment for UK convenience store retailers, according to the latest ACS Voice of Local Shops Report.
And with its meatier margins, more engaged shoppers and significant opportunities for in-store theatre, it’s easy to see why chilled is where it’s at.
“Our chilled business has seen an increase in sales over the past year as shoppers increasingly look to local stores to fulfil their meal-for-tonight missions,” says Matt Croft, co-owner of Croft Stores (Nisa) in Stocks Hill, Silverstone.
“We sell a strong range of Nisa’s Heritage own-label ready meals which are often on offer at 2 for £5 and are very popular with our more value-driven shoppers,” he says.
His experience certainly fits well with HIM’s findings, which show that the chilled foods shopper (excluding milk) is most likely to be on a planned top-up mission, with almost 60% falling into this category.
Chilled foods shoppers also “massively over-index” on the meal occasion (meal for tonight and daytime meal occasion) mission, with 25% of them buying into this, HIM’s Alice Dolling adds.
With long summer days and warm evenings (hopefully) on the cards, Matt is anticipating a further boost to his chilled sales.
“The weather has a noticeable impact on chilled sales, particularly in chilled snacking and food-to-go categories, but also on fresh meats when the BBQ opportunity lifts everything.
“As a result we spend a lot of time monitoring the weather forecast and ordering accordingly. We got the May bank holidays just right, ordering in a much larger quantity of chilled meat products and associated items such as salads and buns, and it paid off. You do have to stick your neck out with chilled, but it’s worth it.”
Weather aside, Matt is also anticipating a further boost to chilled sales as the impact of the Co-op’s recent merger with Nisa comes into its own.
“I expect that chilled sales in our store will get an even bigger boost over the coming weeks as the chilled Co-op own-label lines start to become available to Nisa retailers like us,” he says.
“The Co-op own-label lines are highly thought of by shoppers who are looking to trade up in certain areas, chilled being one of them. I think the deal will really give our range the edge and strengthen our offer in the eyes of consumers even further.”
Interestingly, Matt’s not alone in his conviction that the convenience store sector’s current state of flux has led to a boon for the chilled foods category in his store.
With the dust settling in the wake of the P&H collapse, independent retailer Dean Holborn of Holborns in Nutfield and Redhill, Surrey, has a similar view. “Our chilled range is actually bigger than ever following the collapse of P&H and our move to Blakemore and Spar,” he says.
“The meal-for-tonight mission seems to be growing apace and thanks to our wider, more diverse range, customers are much more engaged with our chilled offer than ever before,” he says.
Peter Lamb, of Lambs Larder in Bells Yew Green, East Sussex, agrees. He saw the writing on the wall prior to the collapse of Kerry Fresh and switched supply to two local suppliers, a move which he believes has ended up benefitting his range.
“We used to be supplied by Kerry Fresh, but came away from that before it went into administration, choosing instead to buy from a range of local suppliers who could better meet our needs and the demands of our customers.
“Nick’s Fine Foods and Curd & Cure are two who we now work really well with. They’ve enabled us to boost the number of more premium, unique chilled goods that we stock, including upmarket cheeses and deli meats, which is what shoppers in this area want.
“While it will have been tough for many stores, I think that the collapse of Kerry Fresh has actually enabled many other retailers to add more interest and USPs to their ranges and certainly benefited local suppliers,” he adds.
Peter’s growing success with more premium, locally-produced chilled foods can be explained by additional HIM findings that demonstrate the sizeable opportunity that exists for trading up in chilled foods. According to HIM, the chilled foods (excluding milk) shopper is approximately 26% more likely to trade up than the average convenience store shopper.
And according to HIM, organic, locally-produced goods and premium products that can help shoppers to create restaurant-quality meals at home are the key areas that chilled customers are becoming increasingly willing to trade up for.
It’s certainly being borne out in Peter’s sales data. “I think shoppers are becoming increasingly more demanding with chilled produce,” he says. “They want quality in the chilled aisle and it shows in our sales figures, with premium cold meats and other chilled deli items registering louder and louder on the sales Richter scale now,” he points out.
“As a result we’ve recently expanded our range of chilled locally-sourced food-to-go products and it’s really paying off. Just today, for example, I’ve sold 12 locally-produced Scotch eggs. They retail at £3 each so that’s no small thing.
“We also do incredibly well with our chilled locally-made sandwiches. We buy in about 500 a day and they sell incredibly well.”
With a hugely successful frozen ready meal offer courtesy of fine frozen food brand The Cotswold Traiteur, Peter doesn’t offer much in the way of premium chilled ready prepared meals. However, for Dean this is becoming an increasingly lucrative segment of the category.
“Premium ready meals are definitely where it’s at for us and it’s an area that we will continue to invest in as the ‘meal-for-tonight’ mission in particular continues to grow,” Dean says.
Healthy does it with chilled shoppers
Chilled foods shoppers place a greater importance on health than the average convenience shoppers, according to HIM. Some 43% of chilled foods (excluding milk) shoppers give health a nine or 10 out of 10 rating for importance. This compares with the average convenience store shopper, where only 29% rate health as highly important.
It’s a finding that means including healthy items in a chilled range and shouting about them on POS is a must, HIM’s Alice Dolling says.
Anca Lazar, brand manager of Cathedral City Snacking, agrees: “A recent backlash against sugar and processed carbohydrates has seen more Brits paying attention to the nutrition label before purchasing. In pursuit of a healthier way of life, these consumers are turning their back on traditional crisps and sweet snacks in search of more nutritious savoury alternatives.”
And by “more nutritious savoury alternatives”, she means cheese.
“Consumers are becoming more mindful of the quality of calories, which means that naturally nutritious, protein-rich snacking products have become increasingly popular with shoppers.”
According to Dairy Crest, the cheese snacking sector is worth £41m in the convenience channel, with volumes growing 8% year on year and adult products gaining traction.
Also responding to the demand for healthier chilled products is Müller, which has achieved a 13.5% reduction in total sugar across its yogurt portfolio since 2015. Having already reformulated the iconic Müller Corner strawberry flavour so that it now has 19% less total sugar, the business also launched its first Müller Corner made with unsweetened natural Greek-style yogurt this spring.
The Müller Corner Plain range replaces the Müller Greek Corner range and contains, on average, 27% less total sugar.
The team behind the successful Eat 17 convenience stores are also making the most of the opportunity, having recently added to their range of store-made Eat 17 branded ready meals with some new premium-priced and health-focused options. New additions include options such as Thai chicken curries and Oriental sea bream, as well as vegan choices such as risotto, burgers, shepherd’s pie and soup.
Eat 17 co-founder James Brundle says: “The trend in healthy eating is massively influencing the food-to-go sector, with consumers looking for fresh, healthy and convenient ready-meal options.
“Our range of ready meals is freshly prepared on site in our Hackney kitchen by skilled chefs using only the finest ingredients.
“Busy consumers want convenience, but they don’t want to be eating processed foods that aren’t nutritious. By purchasing items from the Eat 17 homemade range they can be happy in the knowledge that they’re eating high-quality, unprocessed fresh food that tastes great.”
Suppliers step up
Fortunately for the vast majority of convenience store retailers who don’t boast a flashy in-store kitchen and team of skilled chefs, UK manufacturers are also investing in premium chilled ready meal market.
Take Charlie Bigham’s, for example. The premium prepared meal brand, which saw retail sales grow by more than 15% last year, is rolling out its first nationwide outdoor advertising campaign, positioning itself as the answer to “disappointing evening meals”.
Victoria Russell, marketing manager at Charlie Bigham’s, says: “With more than 11 million premium ready-meal buyers in the UK, there is a big market out there looking for a high-quality meal that can be enjoyed without the preparation time.”
New kit could be a cool investment
In 2017 convenience retailers invested more than £858m improving their stores, and refrigeration accounted for the lion’s share of that spend, according to ACS Voice of Local Shops Report.
More than 30% of retailers paid for new or upgraded equipment in a bid to make the most of the growing chilled opportunity and install more efficient systems.
And with new refrigeration not exactly coming cheap, retailers are having to be increasingly shrewd about the type of equipment and systems they choose – not always a simple task when the equipment itself is also becoming smarter.
Danfoss’ integrated Smart store monitoring system, for example, automatically carries out 24/7 temperature monitoring, logs all data points and produces accurate HACCP-compliant records, while system optimisation leads to longer product shelf life, less food wastage, controlled energy usage and reduced operating cost.
Lifetime operating costs also need to be taken into account, as Alex Williams, national account manager for the UK & Ireland at Danfoss warns.
“While important, the initial purchase price of new equipment is only a part of the story. Often what appears to be the cheapest option is actually very far from it. When a decision is made to add, replace or upgrade refrigeration equipment, it should be considered that the system’s lifetime running costs are often several times greater than its initial purchase cost. Short-term cost saving has the potential to provide a long-term cost pain if life-cycle costs are not given due consideration.”
Part-prepared products that enable shoppers to cook restaurant-quality meals at home easily are also gaining traction, as William Buchanan, joint managing director of Gressingham says.
The brand, which is seeking to introduce duck into another 750,000 households over the next three years, has just launched a new ‘Bistro by Gressingham’ range, designed to score highly in the “end of week and weekend treat trade”.
“While beef, pork and chicken remain as staples in Brits’ shopping baskets, people have become more experimental in the kitchen, and are interested in cooking restaurant-quality meals with a wider variety of ingredients,” Buchanan says.
“We know consumers enjoy duck products, but for some there is still some apprehension about cooking it from scratch.
“We are constantly innovating and evolving our range to tackle these barriers, and our new Bistro range is a significant move to attract new shoppers to the category with occasion-led restaurant-quality dishes,” he adds.
“It’s important to be aware that consumers’ expectations of chilled convenience are changing. Our market research has shown that consumers are more likely to pick up duck for their dinner if they have been inspired by a recipe or an experience.
“The ‘Bistro by Gressingham’ range steers away from other fresh meat products and provides customers with an easy and accessible route to enjoying a restaurant-quality meal at home, with minimal effort involved in the preparation.”
And while premiumisation is becoming increasingly important to chilled shoppers, so too is personalisation, as McCain marketing director Mark Hodge explains.
“Insight tells us that consumers are no longer always looking for the finished product that they can just heat up and serve up on plates. Instead, they are seeking out added-value options that allow for more involvement with the cooking process.
“In addition to this, we can also see that taste buds are changing as consumers increasingly look for new and different flavours or spices that can be added to a variety of dishes.”
McCain responded to the trend with the launch of its chilled Shake Shake and Season & Savour ranges at the end of 2016 which it says are delivering “promising growth”. Both ranges offer consumers a more active role in the cooking process and an “exciting choice of flavour options that can be used for a range of meal occasions”.
The Shake Shake Fries range now has four skus: Fries with Sea Salt & Cracked Black Pepper; Fries with Spanish Smoked Paprika; Sweet Potato Fries with Sea Salt & Three Pepper; and Wedges with Smoky Barbecue. The Season & Savour range comprises three skus including: Triple Cooked Chips with Cornish Sea Salt; Triple Cooked Chips with Garlic and Herbs; and Goose Fat Roasts with Toasted Onion, Garlic & Thyme.
Cream cheese brand Philadelphia has also been doing its bit to make the most of the at-home cooking opportunity, investing in a £5.3m campaign which hit TV screens this January aiming to inspire recipes for the lunch and dinner occasion, spanning TV, press, digital and in-store activity.
Kits pack a punch
According to Mondelez International, innovation in snacking kits is a clear growth opportunity for 2018.
The snacking kits subcategory is the key driver of growth within processed cheese, growing at 10% year on year, with Dairylea Lunchables having a 71% share and 4% annual growth.
April saw the addition of Dairylea Snackers Mini Oreo and Dairylea Snackers Mini Chocolate Cookies to the Dairylea range.
Combining the Dairylea cheese and crackers with the sweet tastes of Oreo biscuit and Mini Chocolate Cookies, the products offer “a unique addition to the market”, according to the company.
The growing ‘meal occasion’ opportunity also presents retailers with a chance to create arresting in-store displays, grouping all key products together, HIM’s Dolling says. “Doing so could in turn encourage up-sell, all the while easing the shoppers’ shop,” she points out.
This technique certainly works for Harj Dhasee, owner of Mickleton Village Stores in Gloucestershire. “Grouping meal components together to help shoppers achieve a high-end meal-for-tonight mission is a fantastic idea, especially if you back it up with an M&S-style promotional mechanic such as ‘Dine in for two for £10’.
“The M&S concept has received phenomenal uptake and there are definitely lessons for convenience store retailers to learn from here. We do lots of things like this and we also use POS material heavily in the chilled aisle. Signs that read ‘Cheese – lovely with port’ have been successful for us.
“It’s all about planting the seeds in shoppers’ minds. Messaging like that within chilled can be really powerful,” Harj adds.
The chilled Halal food market is hotting up
Halal foods are making increasingly big waves in the UK’s chilled foods market, and we’re not just talking about meat.
According to the 2017/18 State of the Global Islamic Economy Report (GIER), “awareness about the concept of halal is on the rise” and companies are responding with new halal product offers including chilled ready meals, and food to go.
It’s a change which has prompted a number of convenience stores, including the Costcutter at London’s Brunel University, to introduce new halal ranges. As part of an expansion of his chilled food-to-go range last year, store manager Arnaud Ledjou took the decision to introduce a number of chilled halal food-to-go lines, including sandwiches, salads and wraps. The move has been hugely popular with the store’s ethnically diverse customer base and food-to-go sales are up 25%.
Interestingly, demand isn’t just coming from Muslims but also “non-Muslim consumers who are choosing to buy into products with greater provenance”.
“Food that could be easily traced to its source, from farm to fork, has become a rarity due to ingredients being sourced from all over the world,” the GIER says. “This has led to halal food being increasingly popular among non-Muslims, such as in China and Europe, while halal food manufacturers are catering to the trend for both religiously permissible food and organic food. This has been a recipe for success, particularly the UK.”